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High Tech Computer, the world?s largest manufacturer of mobile phones operating on Microsoft systems, has surprised investors with an announcement that it is to buy a controlling stake in Dopod, a handset vendor with growing market share in China and other Asian markets.

The acquisition, which HTC wants to complete before the end of the year, is set to delay a planned initial public offering of Dopod shares which investors had hoped would clarify the nature of the ties between the two companies.

?The IPO is still in the works but likely to be delayed,? said Kenny Yang, Dopod?s CFO. The two companies said on Friday HTC would pay no more than $150m for a stake of at least 50 per cent in Dopod.

HTC?s shares have soared over the past year, helped by a more than three-fold jump in 2005 earnings to T$11.78bn and a 100 per cent revenue rise to T$71.89bn. HTC closed at T$1,040 on Friday, making it Taiwan?s most expensive stock.

But analysts are concerned over what they say is very limited disclosure of HTC?s relations with Dopod. The two companies closely co-operate, and are believed to be controlled by the same people, but deny the existence of cross-shareholdings.

HTC is Dopod?s sole handset supplier, while Dopod accounts for about 5 per cent of HTC?s revenue. Dopod, which is registered in the Cayman Islands but run out of Taiwan, made a net profit of $8m last year on revenue of US$130m, Mr Yang said.

Cher Wang, HTC?s chairwoman, is a major shareholder of Dopod, according to Martin Liu, an HTC spokesman.

Mr Yang said no more than 50 per cent of Dopod is owned by the company?s own executives.

Analysts said the planned acquisition could improve disclosure if HTC were to buy shares from those Dopod shareholders who also control HTC. But the two companies said they had not decided on the details of the deal yet.

In the longer term, HTC could transfer part of its operations with the greatest exposure to China into Dopod and then list them in Hong Kong, analysts said. This would follow the example of Honhai, the world?s largest downstream electronics contract manufacturer, which listed its subsidiary Foxconn International in Hong Kong early last year. The move has become a popular model for Taiwanese companies that want to expand their China operations beyond the scope allowed under Taiwan government restrictions.

The planned acquisition also raises questions over HTC?s strategy. The company?s fast growth is driven by an innovative contract manufacturing model under which it makes smart-phones ? handsets with PDA functions ? for mobile services providers such as Vodafone, T-Mobile, Orange and NTT Docomo, rather than relying only on manufacturing for brand companies such as Nokia and Motorola.

But Mr Liu said the lack of scale among operators in Asia meant that HTC needed a different strategy focused on branded sales for the region. He rejected concerns that the acquisition of a branded seller would create conflict with HTC?s contract manufacturing customers.

He said the brand strategy would be limited to Asia and that Dopod would stay out of the developed markets in which HTC works with operators.